Farmer Company sold a piece of equipment for $6,000. The equipment had an original cost of $34,000 and accumulated depreciation of $31,000 at the time of the sale. Which of the following correctly shows the effect of the sale on the financial statements?

Question

Quizplus · Accepted Answer

Option C correctly reflects the effect of the sale on the financial statements. The sale of the equipment results in a gain of $3,000 ($6,000 sales price - $3,000 book value) which is reported on the income statement. The original cost and accumulated depreciation are removed from the balance sheet, resulting in a decrease in total assets and a decrease in total equity.

Farmer Company Sold a Piece of Equipment for $6,000